US: New Home Sales

January 26, 2017 09:00 CST

Consensus Consensus Range Actual Previous Revised
New Home Sales - Level - SAAR 593K 569K to 607K 536K 592K 598K

Consistently volatile is the well deserved reputation of the new home sales report. December sales of single-family homes plunged 10.4 percent in the month to a far lower-than-expected annualized rate of only 536,000. In a small offset, the prior two months have been revised upward by a combined 14,000 (to 598,000 for November and to 571,000 for October).

The 3-month average is of top importance when looking at this report and here the news is less downbeat. Yet the average is down, 12,000 lower in the month to 568,000 which is the softest reading since June. And the year-on-year sales rate, which had been in the double digits, is now negative, at minus 0.4 percent.

The good news in the report is supply which rose 10,000 to 259,000 and is 10.2 percent higher than a year ago. And the drop in sales has also eased the squeeze with supply relative to sales rising to 5.8 months from 5.0 months.

One factor behind December's sluggish sales appears to have been prices where the median, in what is more good news, jumped 4.3 percent to $322,500 for a year-on-year gain of 7.9 percent.

The positives aside, this report follows Tuesday's soft results on the resale side with both pointing to a housing sector that, instead of rising into year-end, faded instead. This report, specifically its implications for broker fees in the housing sector, may be a marginal negative for tomorrow's fourth-quarter GDP report.

Market Consensus Before Announcement
New home sales can be extremely volatile month to month, as they were in November when they jumped 5.2 percent. The 3-month average, however, at a 575,000 million annualized rate, has been holding steady for the last six months. And year-on-year growth in this series is striking, at 16.5 percent in the last report. Forecasters don't seen any give back from November's 592,000 rate with the December consensus at 593,000.

New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances.

This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as new home sales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, new home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.